Deferred Annuity The Best Choice for an Annuitant

Investment in annuity is a prudent decision on part of you in order to strengthen your financial position in the post retirement phase. An annuity is nothing but a contract between an individual and his insurance company to ensure a steady cash flow in future. Several annuity policies are on offer by various insurance companies. The choice should definitely be based on one's estimated budget and examined needs. Of different annuities, deferred annuity is the most popular one. It consists of a unique set of features. The main advantage is an individual is capable of delaying the date of periodic income payment.


The date from which the income payment starts is called maturity date. This date is fixed at the time of agreement between you and the insurer. Your investment will swell up with the passage of time only to get converted into income in the later phase. With a deferred annuity program, you can certainly choose from either of two options – lump sum payment or regular monthly income. In both of the cases, the payment will start from the pre-set date. With the option of deferred payment, you can certainly reset the date to receive your income either in the lump sum form or regular installment format. The long span of deferred annuity can be divided into two important stages – the first one is called savings phase and the second one is called income phase. In the first phase, a person makes investment and in the last phase he enjoys the income payment.


Tax deferred annuity refers to receipt of payment at a future date ( generally in the retirement phase). It constitutes a significant volume of the total annuity sale. The deferred annuity program allows the investors to make at-a-time investment. If immediate annuity is not a need for you, it is best to go for the tax-deferred annuity. This annuity helps you earn additional income on your investment, a part of which may have been deducted as tax. Making an arrangement for delayed tax payment can be done till the withdrawal of the fund. Though withdrawal is allowed but the entire amount can not be withdrawn at one go. Only a certain percentage of the total fund can be taken out at a time. Moreover, withdrawal is only possible once the lock-in period is over. A tax deferred annuity scheme capitalizes the deferred period to build up a huge amount of annuity by converting the primary investment. The important feature of this annuity that your investment is not subject to any tax deduction is responsible for the growth of your money.


Tax deferred annuity is the best option for those who want to make the most of an annuity program. In fact such an annuity helps the investors save a considerable bulk on the tax-deferred basis. Unlike the immediate annuity, one is not required to make immediate tax payment in this type of deferred annuity. The amount and time span to make investment is decided at the time of purchasing the annuity.